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The MA Manual

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Have you ever wondered what your practice is worth or how you can make it more valuable? How to Value, Buy or Sell a Financial Advisory Practice by Mark Tibergien and Owen Dahl, both of Moss Adams, takes readers through the logic and legwork of coming to a true assessment of a financial services business. The authors certainly have credibility; Moss Adams has consulted with more than 1,000 financial services organizations on issues related to valuation, succession planning, practice management and, of course, M&A.

Tibergien and Dahl state that the book’s goal “is to explain how to examine each of the variables and each of the assumptions that can shape conclusions on valuation.” They also identify areas that owners can work on to enhance the value of an advisory business — a topic of interest to all financial planning executives, whether or not they plan to put out the “for sale” sign.

To Tibergien and Dahl, there are several key matters to consider when selling a business:

o Be clear on what your goals are.

o Build a history of the business by gathering relevant documents for the past three to five years.

o Benchmark your business against relevant industry standards to see how yours stacks up.

o When negative variances show up in your benchmarks, think about ways you can close these gaps to enhance value.

o Remember that valuation is more art than science — the firm’s numbers tell one story, but its potential tells another. Position your business so that you can improve cash flow, minimize risk and manage growth.

Likewise, the authors provide several considerations if you prepare to buy a practice:

o Value is a function of future potential, not past results.

o All firms are not created equal; therefore, rules of thumb are not always clear cut.

o Do your own due diligence; the seller’s facts are not always as they seem.

o The devil is in the details; focus on all the terms, not just the price.

In either event, it’s never too early to start the ball rolling. Indeed, if you’re considering making a transition within five years, Tibergien and Dahl write that it’s a good idea to begin preparing and taking actions that will increase the value of your business now. Elite-performing firms have six distinguishing characteristics that contribute to enhanced cash flow, lower risk and a sustainable growth rate:

1. Clear positioning with a well-defined idea of who your optimal client is and what your client-service experience should be. “Strategy is about deciding on the basic value you want to deliver to clients and the type of clients you want to serve. Every firm needs to clearly define both,” write the authors.

2. A systematic operations process that allows you to monitor capacity at each step, budget and plan for future workloads and seek additional resources if demand exceeds capacity. “Growth-oriented firms need to think more about how they’re integrating technology and their administrative staff into their client-service experience.”

3. Human capital and business strategies that address issues such as a career path for staff and compensation plans that augment positive behavior. “Firms that first offer entry positions that require new staff to learn the fundamentals of the job and that create metrics to move staff up the ladder tend to keep everyone focused on the goals.”

4. Financial management of both the gross profit margin and the operating profit margin.

5. Built-in leverage and capacity. The authors note that from a value standpoint, the most valuable financial advisory firms are those that are not substantially or solely dependent on the owner for success.

6. Systematic client feedback. Tibergien and Dahl suggest conducting client satisfaction surveys to gain information about prospects’ and current clients’ expectations, satisfaction and strategies for improvement.

Overall, How to Value, Buy or Sell a Financial Advisory Practice is a thoroughly comprehensive book. Whether you’re in the market to sell your firm or acquire someone else’s, you will find it valuable in assessing both the present and future value of your operations.


Mary Scott is the co-author of Companies with a Conscience; see or write to [email protected].


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